RCM not applicable on reimbursement of expenses paid on behalf of Company by director of company: AAR

The Applicant is a Private Limited Company registered under the prov1s1ons of Central Goods and Services Tax Act, 2017 as well as Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act and KGST / SGST Act respectively). The Applicant is an integrated Custom Research and Manufacturing Services (CRAMS) provider offering single point access to discovery services, CPRD (Chemical Process Research and Development), drug production development & regulatory support services and also pharmaceutical technologies to global pharma and Biotech Companies.

The applicant has sought advance ruling in respect of the following questions:

i. Whether on reimbusement of expenses at actual cost which are incurred by the employee staffs on behalf of Company is liable to tax?

ii. Whether Reverse Charge Mechanisum is applicable on reimbursement of expenses paid on behalf of the company at actuals which are incurred by the employee staff who is also a whole-time director company?

iii. Whether –

a. time limit prescribed to take input tax credit under the section 16(4) of the GST Act, 2017 applies only for the invoice or debit note for the supply of goods or services or both or it shall also applies to invoice issued in accordance with the provisions of clause (f) of sub-section (3) of section 31 i.e.., self-invoices by registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 (Under reverse charge mechanism).

b. Tax paid during current financial year under reverse charge mechanism as per sub-section (3) or sub-section (4) of section 9 for any of the previous financial year transaction, input tax credit on such payment of tax would be availed in the year of payment or in the year in which transaction happened.

iv. If answer to the Question 1 and Question 2 is affirmative, whether reverse charge is to be calculated on values including GST or excluding GST.

Ruling:

i. Reimbursement of expenses at actual cost which are incurred by the employee staffs on behalf of Company is not liable to tax since the same is covered under Clause 1 of the Schedule III of CGST Act 2017.

ii. Reverse Charge Mechanism is not applicable on reimbursement of expenses paid on behalf of the Company at actuals which are incurred by the employee staff who is also a whole-time director Company.

iii. a) This question is not covered under section 97(2) of the COST Act 2017, in respect which an applicant can seek advance ruling and hence this authority refrains from giving any ruling in this regard.

b) This question is not covered under section 97(2) of the COST Act 2017, in respect which an applicant can seek advance ruling and hence this authority refrains from giving any ruling in this regard.

iv. Reverse charge is to be calculated on values excluding GST.

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